The DOJ, AT&T, and the Time Warner Merger: What We Know Thus Far

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Over the past day, we’ve seen a flurry of stories on the Department of Justice’s position on the AT&T/Time Warner cable merger, which was first announced back in October 2016. This story has been bouncing back and forth a fair bit, with various claims from multiple parties. Here’s what we know thus far.

First, Reuters reported that the Department of Justice was threatening to scuttle the proposed AT&T/Time Warner deal unless AT&T agreed to sell off either Turner Broadcasting, which owns CNN, or DirecTV. The same source said AT&T had offered to sell just CNN, rather than divesting the entire unit.

AT&T’s CEO, Randall Stephenson, denied this report, saying: “Until now, we’ve never commented on our discussions with the DOJ,” Stephenson said in a statement. “But given DOJ’s statement this afternoon, it’s important to set the record straight. Throughout this process, I have never offered to sell CNN and have no intention of doing so.”

CNBC also reports hearing that AT&T specifically offered to sell CNN–and only CNN–at a meeting this past Monday, but that the Department of Justice rejected the idea because it wouldn’t solve the department’s regulatory concerns about allowing the two enormous companies to integrate.

ReCode points out out that we’re seeing something of an about-face from the head of antitrust investigations at the Department of Justice on the topic. In 2016, antitrust expert Makan Delrahim, a law professor at Pepperdine University, was confident that there were no big worries about the deal, which represents a vertical merger between two companies with a more diversified portfolio of interests than a horizontal merger between two companies in the same field. Today, as the head of antitrust regulation appointed by Donald Trump, Delrahim has been more cautious.

Makan Delrahim.

Recode draws a strong link between President Trump’s often-stated dislike for CNN and the DOJ’s reported demand that AT&T sell either Turner Broadcasting or DirecTV as a condition for approving the merger. This is absolutely possible: Trump has shown a marked willingness to inject his own opinions and commentary on various matters where past presidents were unwilling to tread. But it’s far from the only explanation.

While the revolving door between industries and the government employees responsible for regulating those industries has been a problem for decades, Delrahim wouldn’t be the first government official to adopt different views when he transitioned to a high-level position. Before his confirmation, former FDC chair Tom Wheeler was derided by many as a stooge of the cable companies and telcos in general. Once in office, he proved himself a champion of reducing broadband costs and improving speeds across the country, including oft-neglected rural areas. Then again, opposing these kinds of mergers also breaks with the GOP’s typical approach, and Trump hasn’t exactly established a reputation for trust-busting in his first 10 months in office. It’s not clear, yet, what’s driving the DOJ’s arguments.

Finally, the Department of Justice has said that selling CNN “would not solve antitrust concerns” about the AT&T and Time Warner merger. Of all the statements released thus far, this is the most meaningless. No one has reported that the sale of Turner Broadcasting or DirecTV as the condition to approve a merger. They’ve reported it as a condition of a merger. Most mergers contain a range of agreed-upon requirements, whether that means taking steps to ensure that the market for TV remains competitive, guaranteeing low-cost packages are available to consumers in areas with limited-to-no competition, or (in other cases) stipulating that an ISP buying another ISP still offers affordable services.

Furthermore, Reuters reports the DOJ referring specifically to the CNN issue, which would still be accurate if the Department of Justice said, “You need to sell Turner Broadcasting” and AT&T responded with “How about just CNN?” You can argue that Delrahim is pushing to slice off Turner Broadcasting because he needs political cover for what would otherwise be an absurdly overt attempt to punish the coverage of a network the president dislikes. Or you can argue that the Department of Justice has legitimate antitrust concerns that spinning off Turner Broadcasting would address. But no one is saying that the DOJ advanced the CNN argument and by refuting the idea in those terms, the officials Reuters spoke to are denying something the earlier Reuters story didn’t advance. It’s a bog standard PR trick. Don’t fall for it.

The Atlantic also has a fairly good writeup on this issue as well. It notes that the DOJ could be concerned about the concentration of media power in a merged AT&T / Time Warner and that this is the proximate cause of the demand that the company divest from CNN. This is echoed in a more recent update from the DOJ via Reuters, which notes that antitrust regulators think a combined company could limit the ability of “innovative new technologies to deliver content to consumers.”

I’m generally against continued mergers and acquisitions. We’re already living in an era that rivals the Gilded Age for concentrated corporate power. The head of the FTC, Ajit Pai, has literally claimed that businesses in areas with just one broadband provider can be considered competitive if another provider exists within a half mile, even if the second provider offers no service to the business in question. There are good reasons to be skeptical of this deal that have nothing to do with President Trump. Until we know the DOJ’s public motivations and arguments, we won’t be able to draw a firm conclusion on the motivations behind the Department of Justice’s reluctance to certify the merger.

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